Markets Shrug Off Semi Weakness…And One Biopharma Stock Surges After Trial Results 6/24/24

0:03Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Decoupled shares of NVIDIA sinking again, erasing more than two weeks of gains. But surprisingly, the broader market holding up as energy and utilities move higher. So does this put an end to the argument? So goes NVIDIA. So goes the market. Plus, a Boeing bounce shares rising even as the government reportedly urges the DOJ to bring criminal charges against the aerospace giant. So has all the bad news been baked into the stock? And later, shares of Anilum Pharmaceuticals soaring to levels not seen in over a year after late-stage trial results for heart disease medication.

0:38CEO Yvonne Greenstreet will join us for an exclusive interview to talk about the drug and what this all means for the company. I'm Melissa Lee, come to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Savita Subramanian, head of U.S. Equity and Quantitative Strategy at Bank of America Securities. Welcome, Savita. Thank you. And we start off with a third day of massive losses for NVIDIA. The semi stock sliding almost 7 percent today. Its biggest drop since mid-April, its worst three day decline since December 2022. It is now down 16 percent from the record high hit just last Thursday, shedding nearly a half a trillion dollars in market cap in that time.

1:17Today's move dragging down the rest of the chip sector, Marvell Technology, Qualcomm, Broadcom, Taiwan Semi all seeing outsized losses. But the rest of Wall Street seemed to shrug off this weakness. The Dow gaining more than 260 points while the S &P 500 closed around the flat line. So this fear we had that the break in NVIDIA would take that down the entire market, is that turning out to not be the case, Guy? One day does not a trend make, Melissa, as you know. But we flagged this last week, that reversal. We talked about how it looked like something we saw in March. And it took about a month-ish for the broader market to then subsequently catch up to the move to the downside in NVIDIA.

1:55Frankly, I think it'll be a little quicker this time. And to your point, I mean, it's 16 percent-ish over the last few trading sessions, probably a little more room to the downside. You know, the market's going to start to catch up. Now, the S &P, as you mentioned, not a big day. Obviously, the Dow was a reversal of the entire thing, and there is a rotation. But at some point, you know, if you continue to see the weakness in NVIDIA and the subsequent 10, you know, the NVIDIA, what's the word I'm looking for? Adjacent trades. Adjacent, like Dow. It's going to have an impact on the S &P without question.

2:23But that's a really important point. I mean, Dell's down 20 % from its recent highs. Another name that we were tracking pretty closely, Supermicro. You remember that one? It kind of made it out of the small caps and got into the large caps in a very short period of time. I don't think I've ever seen that in my career where we've seen that sort of move that quickly. That stock's down about 25%. It never even got near its prior highs from March, that sort of thing. And, you know, so some of these adjacent names are not acting particularly well. I think a lot of enterprise software acts really poorly.

2:50I think there's some consumer internet that acts badly. FinTech acts really badly. So I just feel like if you think about the customer concentration that NVIDIA has, 40 % of their sales come from some of these biggest AI sort of names. If you're thinking about it, it's Google, it's Amazon, it's Meta, and it's Microsoft. At some point, those names will continue or they will play catch up to NVIDIA if it continues to go lower. Are you worried about the rest of the market rolling over? Not worried. I mean, I think one of the reasons we're at 5 ,400. That's our target, which is a little bit lower than where the market is here.

3:22And the reason we're not raising our target is it feels like this is a pretty healthy level. I think there could be a little bit of a shakeout, a broadening of the market, but some give back and, you know, mega cap tech. I think what's happening right now is interesting because we're heading into quarter end, the first half. We're moving into a very potentially volatile period with the election coming up. I think that part of what we're seeing now is just taking in bets, kind of neutralizing exposure. and that's where you see some of these crowded momentum winners, you know, maybe give back a little bit.

3:56I mean, the average target on the street is somewhere around where you are. So maybe that is that maybe people are expecting that this level is healthy. And you know what? Time to lock in some gains. Yeah, I think there was a poll done with over 560 strategist market participants where 5600 is right where people are. Everything you announced coming into the show, everything we're going around the table about, you're talking about the market, not talking about NVIDIA, is great for the market. Let's be clear. I don't hear anything here that's a problem. In fact, narrowing breadth in a rising market is what we should be fearful of.

4:25And if you see the rotation today, why isn't a day when you had rotation into banks and energy a great day? And so when you've had a 15 percent move or a 16 percent move on an intraday high on Thursday and NVIDIA and it's come back, I mean, like it had to. So I just, you know, I look at the dynamic where before that move, I probably said on that show Wednesday or Thursday or Tuesday last week, the Dow has underperformed the S &P by 1400 basis points this year. And by the way, it's an S &P that had two thirds of its return profile coming from a video. It's not really quite, but the math is in terms of the waiting and the move and you can kind of extract it out.

5:01And that's where you get to. So I realize that markets have had a good run. The more important dynamic is that the S &P is up almost 11 percent from from April 19th. Like that's the one that should have people a little bit like, hey, you know, S &P shouldn't be doing this, even though the Nasdaq, the top six, not even the adjacent. But we're talking about everybody other than Tesla. So the magnificent six is 40 percent of the Nasdaq. So, Dan, by the way, welcome back. Well, thank you. Where was he? He was abroad in Europe. And now he's a dude. No, he went to another bunch of companies. I was a Taylor Swift.

5:33I'm a Swiftie. Swifty. Why aren't you happier that the market is brought? Why can't you just be happy for what we have, Dan? It's fine. Well, the Russell 2000 can't get out of its own way. Regional banks can't get out of their own way. I think the IYT guys brought this up. So we're talking about the transports have never confirmed the new highs in the S &P 500. You know, the Nasdaq, to Tim's point, outperformed from the April lows. It was up 17 percent, the Nasdaq composite versus the S &P that was up about 10, 11 percent. So we've seen that massive outperformance. The other thing I'll just say is that when we got into quarter end Q1, you know, we saw a pullback into the April lows, about 6 % in the S &P 500.

6:11When that happened, NVIDIA went down 23%. Think about how much higher NVIDIA is right now. Think about how much higher that Fab Five is right now. So Tim's talking about a narrowing and then this breadth. But energy stocks, they had a good couple days here. They don't act well. Well, it's one day. So I'm not even here to tell you that breadth is back. I'm here to tell you today, if we're looking at the market saying, oh, boy, what happened to the market today? Well, there's a couple of things that happened that if they continue, I don't think are bad at all. I think banks, energy and utilities should be having they should participate.

6:40I am overweight those places relative to their market weightings for my clients and also just outright, because I think the valuations, those are places where I think we can defend what's going on. Well, I'm going to get into your head for a little while and it's kind of roomy. But I would posit that maybe the reversal that we saw at NVIDIA, it's not just a pullback from highs, but it was the way they pulled back. And it was Broadcom and NVIDIA, the two leaders in the AI chip sector, that did the same thing on extremely heavy volume. Hit a record high, then pulled back and closed basically at the lows of the session.

7:14Yeah, and we mentioned that last week. Karen's point was the NVIDIA move just got us back to where we were a few days earlier. And technically, she's right, but it's the way you get there, right? When you see reversals or engulfing patterns, whatever you want to call it, of the magnitude that we've seen now in NVIDIA's case twice in the last few months, you have to take notice. And as I said earlier, it took a while for the broader market to catch up, but it wound up catching up in a pretty meaningful way by the middle of April. I think it's going to be faster this time, and maybe that is a healthy thing.

7:43But again, you've got to watch because banks alone and energy alone, they cannot nearly make up for the ground that you could potentially lose in a tech trade. If you are a believer in a rotation of sorts, Savita, where would you put your money if you pull it out of tech? I love banks. I love energy. My favorite size and style box, this is where I have super high conviction, large cap value. This is where I think we want to go. This is going to start to work in the second half of this year, which is essentially now. And I think that there's an argument to be made that banks and energy in that large cap space are the new high quality areas of the market that actually have, you know, supply discipline.

8:29Banks are de-levered. They're the only lending channel left around after the regionals and private equity and private credit have extended all the loans. So I feel like this is the beginning of a trend where large cap value, dividend yield, kind of all the stuff that worked today is going to kick in and continue to lead the market. And I have a lot of different reasons for this, which hopefully we can talk about as the show progresses. But that is my highest conviction call. So I obviously think the same thing and just pointed that out. But is that what happens when you have a market top? because if you think about these, the weightings of the sectors we're talking about, they're inconsequential on some level.

9:09I mean, energy is 4 % of the S &P. I think it should be 10, but probably not in the next five years will it be. You know, and even though it was 16 back at its peak. So agree that low PE stocks, I read your work. We always all read your work. It's great that they tend to outperform over time. But if you think about some of this outperformance has coincided with market peaks. And again, the way the markets are structured. I don't think we're at a peak though. I mean, I think that maybe we see a little bit of a correction, but, you know, all of the things that typically happen before the market peaks haven't necessarily happened this time around.

9:43We haven't seen, you know, consumer confidence get to those super crescendo-like levels. We haven't seen positioning get really aggressive. We haven't seen, I mean, we've seen some signs. momentum feels a little bit toppy, but I don't necessarily feel like all that money has gone straight into equities and it's over. Yeah, it's funny. As you mentioned, large cap value. Okay. There's not a lot of large cap value out there. When you think about it, pharma doesn't look particularly value-ish. If you're looking at like an Eli Lilly, it's definitely at the heels of a huge mega trend. But I look at banks, I got to go back to April 12th.

10:19Okay. When JP Morgan reported their Q1 results. That stock went down 6.5%. Jamie Dimon, right, the anointed one, was very cautious about the consumer. You just mentioned, you know, not so cautious, but they were cautious about a lot of things going on. That stock gapped down 6.5%, filled in that gap pretty quickly, and now it's higher. But I wonder what's going to happen when we get to two weeks from now or whatever it is, and we start hearing from some of the big banks. You know, I don't know. It doesn't feel particularly great right here, right now, especially where valuations are. Well, you know, Some of the banks are more expensive and some are cheaper, and I guess I would go for the cheaper ones.

10:55But I think that we've heard this caution around the consumer story for a really long time. The consumer is right on the precipice of breaking every week, and there's a new story about why the consumer is weakening. Meanwhile, delinquencies are just starting to tick up from all-time low levels, right? Right. I mean, when you look at the charts, the consumer looks like they're getting a tiny bit less healthy, but from incredibly healthy levels. So I look at data around the consumer moderating and I think, OK, this is just coming off of those COVID highs and things are actually pretty good. I mean, consumers are maybe shifting from services to goods or, you know, maybe like buying fewer boats, selling their boats that they bought during COVID.

11:39You're buying fewer boats these days. I don't have a boat, Tim. I mean, cutting back on the boats, guy. No, you got to cut back on your boat. Well, I mean, now that you've taken me down this road, there's a saying, the two best days in a boat owner's life are the day they buy the boat and the day they get rid of it. Just so we're on the same page. The more you know. Play that graphic. But large cap value. Exxon Mobil's half a trillion dollar company trades at a 15 multiple. Chevron,$300 billion company trades less. So energy is still the place to be. All right. Let's stick with banks here. Developing story for the sector.

12:10The stock's getting a bump today with both the money centers and regionals jumping more than 2 percent. This amid reports that the Fed's bank capital overhaul would be significantly less onerous to lenders than expected. According to Reuters calculations, regulators would require banks to increase the amount of capital they hold in case of emergency by 5 percent rather than the 16 percent originally expected. The Fed telling our Steve Leesman it hasn't made any decisions on timing, process or substance of the new rules and that it's not targeting a specific range. But we did see a lift midday on these headlines crossing.

12:42And obviously, that would be a good thing for the sector. You so love, Savita. Absolutely. I mean, I think even, you know, the yield curve steepening, banks getting a little loan growth. This is all a good, good period. Look, banks have had a target on their back really since the great financial crisis. I'm not saying it's off and I'm not saying it wasn't deserved. I mean, there's no question that too big to fail for a reason. But if you think about the balance sheets here and how they have been buffered and the dynamic of capital giveback, I think is very important. But I think it translates into the multiple that banks are going to be able to trade at.

13:16So I also think about Citibank, which is probably the cheapest of the money center banks, a bank on long. The services dynamic of their business and the growth that you're seeing is part of where that bank is re-rating. And so cost from AI and all that year of efficiency and savings that other people are getting, they're getting a little credit for. But the services business is really important. Cities trading$61. Book value is$99. 80%. I can't even do that math. It's an$80 stock. And we've said that for a while. So there's certain banks that are still cheap right here. All right. Meantime, the Japanese yen touching its lowest level against the dollar since late April.

13:50Trading near 160. It's hovering near its lowest levels in over 30 years. Let's bring in BK Asset Management's Kathy Lean for more. Kathy, 160 is like the line in the sand, 160, 165. And so do you think that the BOJ will actually step in? I think they're going to have to. I think that, you know, if traders take it above the April high and we don't see any evidence of the Japanese government coming in, they're going to push it even higher. The real question, Melissa, is whether it's going to work, because we saw how the charts moved in April and the intervention was very short-lived. I mean, I almost feel like it's a foregone conclusion that it won't work.

14:28I mean, when has intervention actually worked? And so how do you trade that with the knowledge that they'll probably step in and it probably won't work? Well, as traders, it's very dangerous to be holding any type of short yen position at these levels. If you are short yen, it must be very small positions. And I think, you know, even if you have stops, they're going to be slipped incredibly. So the best bet is probably when you have intervention to ride that wave for a very short term move. But usually, you know, within a five day period, the intervention effects tend to fade. So you could also wait it out, wait for the initial volatility to settle and then get back in, knowing that nothing has really changed for Japan.

15:07Kathy, how much of this, Tim, thanks for joining us. How much of the recent move do you think gets back to central bank differentials? Because I don't I don't think a lot of the move over the last, say, call it back six months for the previous two years was necessarily central bank differentials, even though we know the Fed's been aggressive. The BOJ, certainly the conversation is on a relative basis to where they've been. You know, you can make an argument that the BOG, the delta there on their hawkishness was even more than the Fed. But obviously, with the Fed pulling back on cuts this year, the sense that the Fed is maybe the most hawkish of the major global central banks.

15:41Do you think that's an issue? Because it hasn't seemingly historically been the issue with the yen carry trade. I think it's absolutely been an issue. I think that the dollar is strong and that is what's driving up dollar yen. The market shifted dramatically after the last dot plot came out. And at the end of the day, even though the VOJ may be more hawkish on a relative perspective than the Fed, interest rates in Japan are next to nothing compared to more than five percent rate in the U.S. So they're going to need to do a lot more work to keep those funds domestic in Japan. And I think that's one of the most serious problems.

16:14There's another meeting in July, Kathy, and I'm wondering if you think that BOJ will punt bond buying further down the road or if they'll actually engage or give us an outline. I think that they are going to engage in the bond buying changes. But the question the market really is looking for is whether that's going to be accompanied with a rate hike, because we really need that one-two punch to kind of carve out a bottom in the Japanese yen. I think that, you know, right now the market's still very uncertain with whether we're going to get that interest rate hike if they do change their bond buys.

16:48And I think it's part of the reason why the yen remains so weak. Kathy, what level do they start talking about a currency crisis? Because I think it's happening in slow motion. Well, I mean, at the end of the day, they focus more on volatility than the currency level itself, right? So right now, volatility in one month implied options are still significantly lower than where they were in April when they came into the market. So they told us they don't target the currency. They focus more on volatility. But it would have to say that above 165 is where it really becomes trouble. Kathy, great to see you.

17:18Thank you. Thank you. Kathy Lean. So what does this do to your outlook for Japanese stocks? It makes me want to buy gold, first of all. I think Japanese stocks, especially the banks, would struggle under a lower yen environment for sure, especially if you look at Tokyo Mitsubishi Bank, where I think the kind of the export dynamic of this bank is actually really done very well with a weaker yen. I look at Japanese equities on valuation. They're trading it a little under 15 times historically in line, but relative to the current dynamic. No, very cheap, much better corporate governance, a lot of upward pressure from the regulators to have Japanese companies pay back more free cash flow.

17:57So I stayed long Japanese equities. Yeah, I'd just say for U.S. multinationals, though, the strength that we've seen in the dollar, despite that we've seen yields come in 50 basis points over the last few weeks, is kind of interesting. So I wonder if we're going to start hearing that a little bit. I get it year on year. It's probably unchanged a little bit. But if Guy's talking about a currency crisis in Japan, it'll be interesting to see the dollar strength, where that kind of permeates to outside of Japan. Yeah, I mean, I think if you look at earnings, periods of dollar strength, especially relative to the euro, which is probably the most relevant currency for the U.S., are not great for earnings.

18:29So, you know, just that currency translation impact alone could be a hit to earnings going forward. I do think, though, that the U.S. has become a little bit more insulated just by, you know, becoming more inward focused and reshoring. So maybe that dollar math doesn't work the same way it did, you know, prior to the Trump tariffs in 2018 and beginnings of deglobalization. I think that's that's kind of an interesting theme that might might play out a little bit more over time. It's been interesting to see. I mean, the intervention worked for like a month, maybe. And now here we are approaching those levels again.

19:06And they have a problem there, whether they acknowledge it or not. I mean, they raise rates, their currency weakens. That's not good. And the people within the shores of Japan cannot be happy with how their economy is acting right now. So I don't think enough people are talking about it. Through 160, more people will. Coming up, Boeing's fate on the clock. The DOJ deciding whether or not to criminally charge the company and the fallout that choice could have. Plus, some fast movers catching our attention. Bitcoin tumbling and how Eli Lilly's weight loss success is having some medtech companies tossing and turning.

19:36Don't snooze on that one. You've got the details when Fast Money returns.

19:43This is Fast Money with Melissa Lee right here on CNBC.

19:56Welcome back to Fast Money. Boeing getting a small boost today, up a little over a percent. This despite reports that U.S. prosecutors are urging the DOJ to file criminal charges against the company. The Justice Department last month found Boeing had violated a 2021 deferred prosecution agreement reached after two fatal 737 MAX crashes. It has until July 7th to decide how to proceed. And just a few minutes ago, families of crash victims filed a motion asking a judge to impose a corporate monitor to oversee the company, saying, quote, Boeing presents an ongoing threat to public safety. Now, the stock was up, which sort of a surprise.

20:30You hear the headline that there's going to be criminal charges and you think the worst, but the stock went up. Maybe that's good price action for this. I think it is. I don't think D.C. is going to do anything. I think D.C. has an obligation to make noise about doing something, and that's all they're going to do. And I'm not going to get involved in that. And it's been tragedy after tragedy. So those families deserve at least an audience. But I think it's a case, if you look at the company, the dynamics here are really about max deliveries. And that's the key in terms of the catalyst that we reviewed with Phil last week when he talked about whether it's a CEO change.

21:01It's about max deliveries. That leads to cash flow, which would lead back to the re-rating. I just think you've delayed the cash flow argument that is really the strength of B.A. when they're clicking on all cylinders, and that's obviously whenever. It'll be further delayed. I mean, part of the criminal charges could end up being a fine. They've already paid$2.5 billion, and they could pay who knows how much after this. Without question, but again, it's important to point out, last quarter, for example, revenue in commercial airplanes was$4.6 billion. Okay, why is that interesting? because defense, space, and security was almost$7 billion, and global services was another$5 billion.

21:35So I get it. Commercial airlines, everybody knows Boeing for that. But the other businesses that we talk about all the time are not being valued properly. Now, with that said, I've thought that since$195, that's been wrong. But at a certain point, I think the market wakes up to the fact that, you know, they're completely underestimating the power of Boeing. This company has a QA problem. Let's be clear. Okay, this is going back to 2019. There's been, you know, half a dozen whistleblowers. A few of them have been knocked off recently. It seems like this is kind of a situation where, you know, you may want to pay attention to what the feds are doing here a little bit because this company needs to get their act together.